The story you hear all the time about Europe– of a stagnant economy in which high taxes and generous social benefits have undermined incentives, stalling growth and innovation – bears little resemblance to the surprisingly positive facts. The real lesson from Europe is actually the opposite of what conservatives claim: Europe is an economic success, and that success shows that social democracy works. The European economy works; it grows; it’s as dynamic, all in all, as our own.

The BEA recently released data for the amount of GDP produced by US states in 2010, which allows for an updated comparison with European countries (and Japan and Canada). See the table below (international countries are adjusted for PPP). Key findings:

1. The European Union as a group ($32,700 GDP per capita in 2010) ranks below America’s poorest state, Mississippi ($32,764).

2. Even relatively wealthy (by European standards) Switzerland would rank #32 as a US state, behind Georgia. The countries of Belgium and Germany would rank even lower at #46 and #47, and the United Kingdom, Finland, and France would be close to the bottom of American states, below #48 South Carolina.

3.Spain, Italy, Greece and Portugal all rank below America’s poorest state (Mississippi) for GDP per capita.

On a similar PPP basis, New Zealand comes in at US$27,700, between Greece and Portugal.

Writing recently in the Washington Post, environmental guru Bill McKibben asserted that the number and severity of recent weather events, such as the tornado in Joplin,Mo., are too great not to be the result of fossil-fuel induced climate change. He suggested that governments’ failure to reduce emissions of greenhouse gases will result in more violent weather and weather-related deaths in the future. And pointing to the tragedy in Joplin, Mr McKibben summarily dismissed the idea that, if climate change really is occurring, human beings can successfully adapt to it.

“There’s one problem with this global-warming chicken little-ism”, Perry writes. “It has little to do with reality. National Weather Service data on weather-related fatalities since 1940 show that the risks of Americans being killed by violent weather have fallen significantly over the past 70 years.”

Perry notes that:

The annual number of deaths caused by tornadoes, floods and hurricanes, naturally, varies. For example, the number of persons killed by these weather events in 1972 was 703 while the number killed in 1988 was 72. But amid this variance is a clear trend: the number of weather-related fatalities, especially since 1980, has dropped dramatically.

For the 30-year span of 1980-2009, the average annual number of Americans killed by tornadoes, floods and hurricanes was 194 – fully one-third fewer deaths each year than during the 1940-1979 period. The average annual number of deaths for the years 1980-2009 falls even further, to 160 from 194, if we exclude the deaths attributed to Hurricane Katrina, most of which were caused by a levee that breached on the day after the storm struck land

This decline in the absolute number of deaths caused by tornadoes, floods and hurricanes is even more impressive considering that the population of the United States more than doubled over these years – to 308 million in 2010 from 132 million in 1940.

“So confident am I that the number of deaths from violent storms will continue to decline that I challenge Mr. McKibben – or Al Gore, Paul Krugman, or any other climate-change doomsayer – to put his wealth where his words are. I’ll bet $10,000 that the average annual number of Americans killed by tornadoes, floods and hurricanes will fall over the next 20 years. Specifically, I’ll bet that the average annual number of Americans killed by these violent weather events from 2011 through 2030 will be lower than it was from 1991 through 2010.

“If environmentalists really are convinced that climate change inevitably makes life on Earth more lethal, this bet for them is a no-brainer. They can position themselves to earn a cool 10 grand while demonstrating to a still-skeptical American public the seriousness of their convictions. But if no one accepts my bet, what would that fact say about how seriously Americans should treat climate-change doomsaying? Do I have any takers?”

As the accompanying narrative states, the chart above shows monthly private sector jobs since January 2005 calculated by the Bureau of Labor Studies from two different methods: a) the household survey, which is larger and includes self-employed workers, and b) the establishment survey, based on company payroll records. Over time they move very closely, although monthly variations are common – for May the household survey showed a gain of 373,000 private sector jobs, compared to a gain of only 83,000 private payroll jobs. But since the cyclical bottom in December 2009, both surveys are showing gains of more than 2.1 million private sector jobs, which is a healthy increase of 132,000 private sector jobs per month on average. In the first five months of 2011 through May, private sector job growth has accelerated to an average of 200,000 new jobs per month, according to the household survey.

For some related commentary, see Scott Grannis’ post ‘The Employment Situation Continues to Improve,’ with this conclusion: “The economy may have hit a mild soft patch, but it is not sinking and is likely to continue to grow. Optimists will once again be rewarded for their patience.” Scott also comments on the positive effects of the decline in public sector jobs:

We are now seeing evidence that a significant shrinkage in the bloated public sector workforce doesn’t necessarily lead to a painful result for the economy as a whole. In fact, cutting back government spending can free up resources that can be put to better use by the private sector, making the economy stronger over time.

This is (part of) what ‘rebalancing the economy’ inNew Zealand has to mean.

Another graph courtesy of University of Michigan professor of economics and finance Mark Perry and his blog Carpe Diem.

The chart above shows manufacturing output as a share of GDP for both the world and the United States using United Nations data for GDP and its components at current prices in US dollars from 1970 to 2009.

Perry notes:

We hear all the time from Donald Trump and others about the “decline of U.S. manufacturing,” about how nothing is made here any more, and how everything that used to be made here is now made in China … In reality, the decline in U.S. manufacturing as a share of GDP is really a global phenomenon as the entire world becomes increasingly a services-intensive economy.

As a share of GDP, manufacturing has declined in most countries since the 1970s. A few examples: Australia’s manufacturing/GDP ratio went from 21.3% in 1970 to 9% in 2009, Brazil’s ratio went from 24.6% to 13.3%, Canada’s from 21.7% to 11.3%, Germany’s from 35% to 19%, and Japan’s from 35% to 20% …

The standard of living around the world today, along with global wealth and prosperity, are all much, much higher today with manufacturing representing 16-17% of total world output compared to 1970, when it was almost twice as high at 26.7%. And for that progress, we should applaud, not complain.

The same trend has occurred in agriculture in most countries over the last 100 years – there has been a dramatic decline in agricultural employment. Would we really be better off if more people worked on farms?

Note also that the decline in the manufacturing share of GDP is to some extent a statistical artifact. Many functions, such as accounting and IT, that were once performed in-house by manufacturing firms have been outsourced to service sector providers.

Using Mark Perry’s numbers, the share of manufacturing in GDP for New Zealand has fallen from 21.6% in 1970 to 14.9% in 2009. Manufacturing is still a major sector in the New Zealand economy and bigger as a share of GDP than in the United States and Australia.

Abstract:We use a parametric method to estimate the income distribution for 191 countries between 1970 and 2006. We estimate the World Distribution of Income and estimate poverty rates, poverty counts and various measures of income inequality and welfare. Using the official $1/day line, we estimate that world poverty rates have fallen by 80% from 0.268 in 1970 to 0.054 in 2006 (see chart above). The corresponding total number of poor has fallen from 403 million in 1970 to 152 million in 2006. Our estimates of the global poverty count in 2006 are much smaller than found by other researchers. We also find similar reductions in poverty if we use other poverty lines. We find that various measures of global inequality have declined substantially and measures of global welfare increased by somewhere between 128% and 145%. We analyze poverty in various regions.

Mark Perry noted on his blog that if these estimates are accurate, the 80% reduction in poverty between 1970 and 2006 has to be the greatest reduction in world poverty in such a short time span in the history of the world, and the 97% reduction in East Asia has to be the most significant improvement in regional standard of living in history as well. The reasons for the record reduction in world poverty might be globalisation, market-based reforms, liberalisation, information age technology, productivity gains in agriculture and the collapse of central planning in China and India. Even the trend for Africa is encouraging.

Daniel Henninger has written a great article in the WSJ about the largely unremarked, but undoubtedly remarkable, role globalisation played in the amazing rescue of the miners in Chile (hat tip: Carpe Diem).

A couple of excerpts below:

It needs to be said. The rescue of the Chilean miners is a smashing victory for free-market capitalism.

If those miners had been trapped a half-mile down like this 25 years ago anywhere on earth, they would be dead. What happened over the past 25 years that meant the difference between life and death for those men?

Short answer: the Center Rock drill bit.

This is the miracle bit that drilled down to the trapped miners. Center Rock Inc. is a private company in Berlin, Pa. It has 74 employees.

A miracle drill bit yes, but the drill bit was only one of many little miracles of profit-driven, private enterprise from all over the globalised world that helped save the miners:

- The drill’s rig came from Pennsylvania

- The high-strength cable winding came from Germany

- The communications cable that linked the miners to the world above came from Japan

- Samsung of South Korea supplied a cellphone that has its own projector

- Cupron Inc of Virginia supplied socks made with copper fiber that consumed foot bacteria, and minimized odor and infection

The profit = innovation dynamic was everywhere at the mine rescue site.

That’s right. In an open economy, you will never know what is out there on the leading developmental edge of this or that industry. But the reality behind the miracles is the same: Someone innovates something useful, makes money from it, and re-innovates, or someone else trumps their innovation. Most of the time, no one notices. All it does is create jobs, wealth and well-being. But without this system running in the background, without the year-over-year progress embedded in these capitalist innovations, those trapped miners would be dead.